Reinsurance Arbitrator and Expert

A. Overall Reinsurance Expertise

Generally. My background includes extensive exposure to the various reinsurance mechanisms and relationships. Set out below is further detail relating to this experience, and more information is available at my insurance arbitration website www.insurance-metrics.com.

Reinsurance Arbitrator. I am certified by AIDA Reinsurance and Insurance Arbitration Society, United States (“ARIAS-U.S.”) as an arbitrator for reinsurance and insurance matters. Today, there are about 300 individuals so certified by ARIAS in the United States.

ARIAS-U.S. certifies knowledgeable and reputable professionals for service as panel members in reinsurance and insurance arbitration matters. The organization’s criteria for certification is as follows:

10 years of significant specialization in the insurance/reinsurance industry;

1. Commissioner of Insurance, Iowa 1986- 1990 / Reinsurance. Overseeing all facets of insurance regulation including oversight over all licensed insurers and their related reinsurance relationships. As Insurance Commissioner, I dealt regularly with reinsurance and its relationship to primary insurance. This is so because primary insurance does not exist without related underlying reinsurance relationships.

Oversight Over Insurance Companies / Reinsurance. I was also responsible for the regulatory oversight of all insurance companies’ agents and brokers authorized to conduct business in the state of Iowa. My Department was responsible for solvency oversight, insurance company examinations, financial and accounting matters of insurance companies, including their related reinsurance relationships, consumer protection, agent licensing, and oversight of the property casualty and life and health insurance industries. In addition, I oversaw state regulation of the securities industry with Iowa’s Superintendent of Securities reporting directly to me.

Examination of Insurance Companies. As Insurance Commissioner, I directed and oversaw the examination of all insurance companies authorized to do business in the State of Iowa. Those examinations included focus on both financial matters (so called triennial examinations of insurers - of which well over 100 such examinations were conducted while I was Commissioner) and examinations of specific complaints about insurers (so called Market Conduct Examinations - well over 50 such exams were conducted while I was Commissioner).

Examinations / Reinsurance. The triennial examination included rigorous focus on all aspects of the reinsurance mechanism. During the examination process, examiners review all of the reinsurance contracts entered into since the last examination. In so doing, examiners confirm balances due, particularly due the direct insurer. These balances due are generally an asset of the insurer. Because these balances due are often significant dollar amounts, they are subject to inordinate scrutiny, including review of the financial status of the reinsurer and that reinsurer’s admission status in the state.

Annual Statement Reinsurance Reporting. The Annual Statement Blank for both Life Health and Property Casualty Insurers includes the requirement of extensive reinsurance reporting.

Life Health. For example, see the NAIC Annual Statement Blanks for Life and Accident and Health Insurers: Exhibit 1 - Part 2; see also Schedules S, Part 1 (Reinsurance Assumed), Part 2 (Reinsurance Recoverable), Part 3 (Reinsurance Ceded), Part 4 (Reinsurance Ceded - Unauthorized) and Part 5 (Reinsurance Ceded, 5-Year Exhibit).

Property Casualty. See also the comparable exhibits and schedules for Property Casualty Insurers, specifically Schedule F which includes (as above) exhibits on reinsurance assumed, reinsurance recoverables, reinsurance ceded, reinsurance ceded - unauthorized and reinsurance ceded within a five-year exhibit. These exhibits and the documents they reflect are the subject of extensive regulatory scrutiny both during annual statement review and during Financial and Market Conduct Examination reviews.In addition “reinsurance recoverables” are an asset and listed on the Annual Statement Blank asset exhibit (page 2). Along those same lines, where a direct insurer has reinsurance with an unauthorized reinsurer (non-admitted) that insurer can take credit for the reinsurance to the extent that the reinsurer has filed an appropriate (a) letter of credit; (b) trust agreement; or (c) has agreed to having funds withheld.

Admission of Reinsurers to do Business in the State. Reinsurers, like insurers, apply for admission to do business in every state in which they conduct business. They become licensed through the same process as ordinary insurers. In addition, at the option of the reinsurer, they can become “accredited” to do business in the state upon the validation of at least $20 million in surplus.

Approval of Reinsurance Transactions. Additionally, the Insurance Code of Iowa required review, scrutiny and - as appropriate - approval of substantive reinsurer transactions relating to domestic insurers (e.g., bulk reinsurance etc.). As Commissioner, it was my duty to review such transactions on a regular basis and pass judgment on the proposed transactions.

Validation of Risk Transfer. Reinsurance transactions are required to transfer sufficient risk from the insurer to the reinsurer in order to be accounted for as reinsurance. During triennial examinations the terms of each contract are examined to ensure that actual “risk transfer” took place rather than an implicit “borrowing of surplus” by the insurer.

Department Reinsurance Expertise. Each insurance department (including the Iowa Department that I headed) is required to possess reinsurance expertise. That expertise - on a front line basis - is embedded in the Examiners in Charge (EIC). Supporting that expertise was “in house” reinsurance expertise as applied to the financial statements. Indeed, as a condition precedent to receiving NAIC recognition as an accredited regulatory state, Iowa was required to possess reinsurance expertise.

Reinsurance Regulations. Reinsurance is a stabilizing force from a regulatory - solvency standpoint. On the property casualty side, the “Kenny Rule” of thumb 3 to 1 (that is, for every $1 of surplus, $3 of premium can be written) is actually enforced in a real world fashion by reinsurers who generally insist on the adherence of this and other ratios by the underlying insurers.

Unwinding Reinsurance Transactions. As Insurance Commissioner, I was also responsible for liquidating insolvent insurers. A significant dimension of such liquidations included unwinding related reinsurance transactions and the collection of often-significant reinsurance owing. Indeed, it is not uncommon that the primary asset of insolvent insurer is reinsurance recoverables. In this capacity, I have negotiated many reinsurance settlements of substantial sums.

Major Insurance State. Iowa has about 1,000 authorized property casualty insurance companies and over 500 life insurance companies (all with related reinsurance relationships) and an unusually large number of domestic insurance companies. Consequently, insurance and reinsurance regulation in Iowa is a serious job.

National Application. Although this experience happens to be Iowa based, there is not any relevant difference between how the various states regulate reinsurance. Indeed insurance and reinsurance today is conducted on a national and international basis and can be so conducted because the insurance laws in the various states have a high degree of similarity. As a result, insurance expertise today is uniformly applicable in the various states.

2. National Association of Insurance Commissioners (NAIC), 1986 - 1990. Concurrent with my service as Iowa Insurance Commissioner, I served as a member of the NAIC. The NAIC is an organization of the Insurance Commissioners of all 50 states and meets quarterly in locations throughout the U.S. to consider and evaluate national insurance and reinsurance issues. Further, the organization is professionally staffed with more then one hundred personnel. The organization is based in Kansas City, Missouri. The NAIC considers all major insurance and reinsurance issues and then promulgates model insurance laws and regulations, which are then routinely (but optionally) adopted at the individual state level.

NAIC Chairmanships - Chairman of the Midwest Zone. I was elected by my fellow Insurance Commissioners from the Midwest Zone (composed of the Midwest states, constituting about one quarter of all the states) to provide leadership and representation of the Midwest before the balance of the states. This position included a position on the Executive Committee of the NAIC as well as major responsibilities relating to the assignment of states (and their related examiners) to specific examinations, both triennial and Market Conduct.

NAIC Leadership: Member of the Executive Committee. I also served as an elected member of the Executive Committee of the NAIC, the body that served as the steering committee of the organization, providing leadership between full membership meetings and providing recommendations to the full membership as to complex or politically charged issues within the organization.

Model NAIC Reinsurance Provisions. Over the years, the NAIC has enacted model laws and regulations relating to reinsurance. Among the most recent has been the requirement of a true transfer of risk in the reinsurance transaction and not just a financial transaction intended to serve as surplus relief. In any event while active in the NAIC and now as well, I became familiar with the various models and their day in and day out application.

Other NAIC Chairmanships: I also served in a number of NAIC capacities including Chairman of the Financial Services and Insurance Regulation Task Force.

Other NAIC Chairmanships - Chair of the Life Insurance Committee; Chair of the Universal Life Insurance Task Force; and Chair of the Life Insurance Product Development Task Force. As a member of the NAIC, I served as both Vice Chairman and Chairman of the NAIC Life Insurance Committee, Chair of the Universal Life Insurance Task Force and Chair of the Life Insurance Product Development Task Force.

Ongoing Regulatory Involvement. In the years since leaving the regulatory ranks, I have continued to be closely involved with the NAIC and the regulatory community. As President and CEO of NCCI, I was in regular attendance at meetings of the NAIC and continue to attend these meetings and to be actively engaged with the regulatory process.

3. First Deputy Iowa Insurance Commissioner, 1976 - 1978. As First Deputy Insurance Commissioner, I had oversight responsibility over all facets of insurance regulation, including oversight of the property casualty division, the life health division, agent licensing and consumer complaints. As First Deputy Commissioner, the functions of overseeing all aspects of insurance companies and their various reinsurance relationships reported to me.

Approval of Reinsurance Transactions. The Insurance Code of Iowa required review, scrutiny and - as appropriate - approval of substantive reinsurer transactions relating to domestic insurers (e.g., bulk reinsurance etc.). Similar to duties I conducted as Commissioner, as Deputy Commissioner, it was likewise my duty from time to time to review such transactions on a regular basis and pass judgment on the proposed transactions.

Reinsurance Generally. As First Deputy Commissioner, I had similar responsibilities in connection with reinsurance as are outlined above under my duties as Insurance Commissioner. Those included reinsurance in connection with (a) the Annual Financial Statement; (b) the examination function; (c) admission of reinsurers; and (d) liquidation activities.

4. Iowa Assistant Attorney General Assigned to the Insurance Department, 1975-1976; serving as the Department’s General Counsel. As Assistant Attorney General, I had departmental prosecutorial responsibilities for violations of the Insurance Code under the state’s APA act. The Attorney General responsibility also included issuing Attorney General Opinions as to the construction of insurance and reinsurance matters.

5. Legal Counsel to House of Representatives. As legal counsel to the Republicans of the Iowa House of Representative (1975 session) I provided counsel on all relevant caucus issues and provided the following support:

Researched pending legislation;

Prepared memorandums in support of proposed legislation;

Provided legal advice; and

Participated in bill drafting, including that relating to insurance and reinsurance legislation.

6. Elected Member of the Florida House of Representatives. I serve as a Member and Vice Chairman of the Insurance Committee (among other committees), which has legislative liaison duties to the Florida Office of Insurance Regulation (“FL OIR”), whose own duties include rate making, rate approval, and policy language oversight.

C. Reinsurance - Industry

7. President and Chief Executive Office of the National Council on Compensation Insurance (NCCI; Boca Raton, Florida), 1990 - 1998. NCCI is one of the larger and more pervasive insurance organizations. During my tenure as President and CEO, NCCI had (and continues to have) responsibility to accurately price and file pricing for some $12 - $15 billion of workers compensation insurance in 39 states throughout the U.S. NCCI prepared proposed premium filings for regulators to approve by extracting key data from its 600 member insurance companies and then used that data to project necessary premium changes. NCCI accomplished this mission through some 1,000 employees of which approximately 600 were professionals, and had an annual revenues of $140 million.

Industry Standards of Practice. While President and CEO of NCCI, I visited and physically toured and reviewed in excess of 400 insurance companies including their various reinsurance relationships (ceded and assumed) and gained direct exposure to the procedures and processes and standard industry practices of the U.S. insurance and reinsurance community. As such, I became and am very familiar with industry wide standards of practice.

Data Collection of Catastrophic Claims. While President and CEO of NCCI, I increased our attention to the specifics of the largest, catastrophic claims, including the conditions surrounding their occurrence and insurer and reinsurer reserving issues relating to these claims. We regularly monitored these claims to understand industry-wide trends in the frequency and severity of catastrophic claims likely to penetrate excess reinsurance layers.

Rate Filing Activity - As part of our annual review of rates in the 39 states for which NCCI functioned as the rating bureau, we regularly surveyed our member companies as to the reinsurance environment in each such state. Our surveys typically encompassed availability, affordability and breadth of coverage issues. Whenever conditions warranted, information from these surveys were considered in our rate change recommendations.

Excess Loss Factors Product. These factors are calculated annually on a state level. The factors are expectations of the percentage of total claim dollars that will exceed a range of reinsurance attachment points between $25,000 and $5,000,000.

Large Deductible Discounts Product. These factors are the savings that an insurer can expect if it is reimbursed for all claim dollars beneath a specific threshold per occurrence.

“Table M” Product. This product consisted of a table of factors that are the expected losses for a portfolio of insurance policies above a specific attachment point. The factors are used by reinsurers pricing aggregate portfolio reinsurance. These factors are calculated for a range of portfolio sizes from the tens of thousands to the hundreds of millions of dollars.

Annual Statistical Bulletin. This data bulletin provided an overview of claim, frequency and loss development information on a state specific basis. Separate analyses of the largest and most severe workers compensation claims likely to penetrate excess reinsurance contracts was included in this product.

8. General Counsel and Director of Government Relations to the American Academy of Actuaries (Washington D.C.), 1980 - 1983. I served as General Counsel and Director of Government Relations for the American Academy of Actuaries, including advising on admissions, discipline, federal antitrust and general corporate law. I represented the 10,000 member professional organization before Congress (e.g., Senate Committees on Banking, Commerce, Finance and Labor, and House committees on Education, Labor, Energy, and Ways and Means) and the various federal regulatory agencies.

The Academy is the professional organization of actuaries and includes qualified actuaries from all disciplines and all forms of insurers. Academy members included affiliation with virtually every reinsurer in the World. The Academy’s Board of Directors was likewise made up in part of leading reinsurance company executives. Further, actuaries establish the premiums and validate risk transfer relating to most reinsurance products. I worked side by side with such actuaries as they developed standard methodologies for such premium calculations (e.g., see Pronouncements of the Actuarial Standards Board).

9. Risk Metrics Corporation. I co-founded this information company in 1998. Risk Metrics (including Datalister, Inc.) gathers, normalizes and sells public data relating to workers compensation to a wide range of insurance oriented customers, including insurance agents. I sold my interest in this company several years ago.

10. Attorney in Private Practice. As an attorney in private practice, I represented a number of insurer and reinsurance interests and became familiar with regulatory and industry standards of practice relating to reinsurance transactions. Those interests included the position of:

Iowa Counsel to the National Association of Independent Insurers (NAII);

Iowa Counsel to the Professional Insurance Agents of Iowa; and

Counsel to the Iowa Association of Life Underwriters.

Specific duties as counsel to the NAII included in-depth familiarity with insurers and their related reinsurance relationships.

11. Experience Applicable State to State. There is little if any difference between regulatory and industry standards of care provisions that come to bear on insurers and reinsurers among the various states. This is because insurance and reinsurance today is conducted on a national and international basis and can be so conducted because the laws and standard of practice of the various states have a high degree of inter-related uniformity.